Divestment just got a whole lot easier. Until now, an institutional investor like a pension fund or university would have to pour through its portfolio and remove each company or group of companies that was involved in carbon extracting. That will all change soon. American-based Natural Resources Defense Council has partnered with investment manager Blackrock and the London-based FTSE group to prepare the world’s first oil-, coal- and gas-free stock index.
What this means is investors don’t need to do a full audit to make sure their money isn’t funding global warming. Meanwhile, we all have a financial barometer to check and to prove the transition to a low-carbon economy is well underway. If this index outperforms others linked to the extraction of carbon, it will give wary investors (who have to do right by their clients) the license to divest from fossil fuel companies.
It also may make financial sense to put one’s money into the new index. As this blog has illustrated before, the potential of a carbon bubble (when new climate regulations lead to stranded assets for energy companies) threatens the portfolio of anybody who is invested heavily into fossil fuel stocks. Climate campaigners have argued for divestment not just on moral grounds, but financial ones. This latest development will certainly give them more ammo to persuade investors to move their money.
